Australia's Housing Market Over 4 Times Size of Economy, US is Under 2

Congratulations to Australia for having the biggest housing market relative to the size of its economy.

BusinessWeek notes the value of the Australia's homes has ballooned to A$7.3 trillion ($5.6 trillion) -- or more than four times gross domestic product.

Not even the U.S. and U.K. markets achieved such heights at their peaks a decade ago before prices spiraled lower and dragged their economies with them.

“The risk is that it leaves the Australian economy extremely exposed, and a minor shock could become far more significant,” said Daniel Blake, an economist at Morgan Stanley in Sydney.

For How Much Longer?

Rapidly cooling house prices in Sydney and the sudden withdrawal of Chinese investors from the property market may lead the Reserve Bank to cut interest rates, according to investment bank Credit Suisse.

"Over the past few months, the Sydney housing market has not only cooled down, but has arguably turned cold," Credit Suisse wrote.

"Over the past year, Chinese capital flows have fallen considerably, in part reflecting the impact of stricter capital controls.

"This fall foreshadows weakness in NSW housing demand in the year ahead."

Mike "Mish" Shedlock

It’s more apples-to-apples to compare regions. Australia, as in the country populated by humans hence having a housing “market” (really, like elsewhere, a racket by any reasonable definition), consists of a few spots along the coasts. Compare similar coastal “markets” in the US, and things likely look just as bad.

From a “financial system” solvency (which idiots everywhere have been sufficiently indoctrinated to blindly believe is some sort of good thing) POV, it may matter; in the sense that US coastal “markets” can, once again at least in theory, be bailed out by Fed transfers from a populated and at least somewhat productive heartland. But at the same time, the Aussie “economy,” aside from the housing rackets, is likely much more value dense than the US one. As it consists largely of mining, and even of large inbound wealth transfers (Chinese and others.) While what passes for “economy” in the US, is increasingly a bunch of halfwits taking cuts in newly printed “money,” for cackling about transferring paper describing empty hype between them; while having the government drag eachother into kangaroo courts for looking at eachother’s step daughters on the side.

Why should taxpayers intervene to keep housing prices high?

"Rapidly cooling house prices in Sydney and the sudden withdrawal of Chinese investors from the property market may lead the Reserve Bank to cut interest rates."

"Rapidly cooling house prices in Sydney and the sudden withdrawal of Chinese investors from the property market may lead the Reserve Bank to cut interest rates". So housing inflation is inflation, too? I am confused.

This comment section really needs to be fixed.

Aus, NZ, Canada, U.S., London....housing markets have become less purely domestic driven markets and more international driven markets. Talking the big cities in these countries (Toronto, Van, Auckland, Sydney, Melbourne, NYC, SF, Seattle, LA, SD). They have become driven by millions of Chinese, not just the citizens of those countries. Question is, is the Chinese demand in these cities permanent or temporary? It was temporary with Japanese demand in the 1980's. But Japanese were buying commercial properties only in the 1980's. Chinese are buying both commercial property and single-family homes and condos.

MntGoat, the Chinese communities in those cities are big enough that it feels like China. No need to go back which I doubt was the case with the Japanese.

That is another good point Maximus - the Japanese were not immigrating to the U.S. in the 1980's like the Chinese are now. But a lot of capital did flow from Japan to the U.S. back at their bubble peak late 80's - including Mitsubishi (I think it was M) buying the Rockerfeller building in NYC for a nutty peak signalling price in late 80's. Which later was basically a massive foreclosure of a skyscraper ( the "grave dancer" Sammy Zell tried to buy the mortgagebon the Rockerfeller building on the cheap post crash early 90's).

Good points made by both Stuki and MtnGoat. Real Estate markets are not easily compared. Aus markets are more equivalent to high end coastal markets in the US like Hawaii, California, and Florida. They are also heavily influenced by foreign buyers. Plus, all the countries mentioned are highly desirable places to live; democracies, excellent economies, good health care, rule of law, low crime rates, lack of gun violence.

“Why should taxpayers intervene to keep housing prices high?”

Because the average housing owner, and even more so the average mortgage banker; is wealthier, hence better politically represented, than the average taxpayer.

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